Author Archive
Up in the Air
October 20th, 2009
On September 30, a federal district judge in a New Mexico suit brought by US Airways to free it from state regulation of beverage service ruled that the 21st Amendment prevents the federal government from preempting state regulation of alcoholic beverage service aboard federally regulated carriers. The decision leaves New Mexico regulators free to treat airliners in their airspace as if they were local taverns with respect to licensing, server training and over-service.
Although the case does not deal directly with wine distribution, it is a significant addition to the “weak Granholm” viewpoint, which lends support to trade barrier proponents in the second wave of wine access litigation now in the lower federal courts.
Supremacy
Judge Armijo’s opinion in US Airways, Inc. v. O’Donnell introduces some legal elements that may be unfamiliar to industry observers, but it represents a reading of 21st Amendment jurisprudence that is well worth examining. Examination will involve a little more detail about the Supremacy Clause of the federal constitution than has appeared to date in most public discussion of Granholm issues, but that will be unavoidable as post-2005 beverage law develops.
In the subject area of access by wine sellers to consumers and retailers in other states –that is, the development of a national market in direct distribution and direct retail sales and shipment– the recurring theme has been alleged incompatibility of state-imposed restraints with the Commerce Clause, which famously forbids permitting in-state wineries to sell and ship directly to consumers while denying that privilege to out-of-state wineries. That principle is said to arise under the “dormant” Commerce Clause, because it operates in an area, interstate commerce, where Congress holds exclusive power to legislate and has elected not to exercise it, thereby leaving the area federally unregulated and off-limits to state statutory restraints.
Supremacy Clause cases address the non-dormant side the Commerce Clause coin, where Congress has in fact exercised its power to legislate over a subject within its constitutional authority. A key question in Supremacy Clause litigation is whether existing federal legislation occupies the field being regulated, thereby invoking the Article VI declaration that laws passed by Congress “shall be the supreme Law of the Land … any Thing in the Constitution or Laws of any state to the Contrary notwithstanding,” to invalidate (i.e., “preempt”) the challenged state enactment. The answer is found by ascertaining the intent of Congress from the text of the statute.
Federal statutes may be found preemptive in more than one manner. The principal division is between (1) express preemption, i.e., a direct statement in the federal statute, denying states concurrent jurisdiction to legislate on the subject, and (2) implied preemption, i.e., a clear implication of that intent arising from the statutory text as a whole. Implied preemption further subdivides into “field preemption,” when the scope of the federal statutory scheme displays an intent fully to occupy the particular subject area, and “conflict preemption,” when regulated persons cannot comply with both the federal statute and the state law in question. The New Mexico case involves questions of express preemption and field preemption in the subject area of alcoholic beverage service on federally regulated air carriers.
In US Airways the federal legislation under consideration was the 1978 Airline Deregulation Act, which charges the Federal Aviation Administration with the duty to prescribe “regulations and minimum standards for other practices, methods, and procedure the Administrator finds necessary for safety in air commerce and national security.” Pursuant to that directive, the FAA adopted a regulation stating that no carrier under its jurisdiction “may serve any alcoholic beverage to any person aboard any of its aircraft who … [a]ppears to be intoxicated.”
The state had adopted a far more extensive set of regulations, including requirements for licensure and server training and penalties for over-service. Following a collision on a New Mexico highway involving multiple fatalities and a driver who was allegedly over-served on a US Airways flight to the state, the regulatory authorities ordered the airline to cease serving alcoholic beverages to passengers on flights arriving in or departing from locations within the state, without licensing as a retail outlet and compliance with regulations applicable to retail licensees.
Simple Question, Different Answers
The Airline Deregulation Act expressly provides that states “may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of [a federally regulated] air carrier.” Thus, the square one question was whether the suit were a simple case of express preemption, taking beverage service to be a “service” of US Airways.
As the meaning of “service” in the Act controls the outcome of the case, it is not surprising that the parties advanced different definitions. The state’s position was that the sentence in which the term appears deals with transportation services, so the term must be restricted to things like frequency of flights. That is a conclusion reached by one of the five federal appellate courts in separate circuits that had interpreted the Act (none of them the 10th Circuit, where New Mexico is located).
An alternative reading begins with observing that the statutory phrase is equivalent to “a price, a route or a service,” because the introductory indefinite article is placed to modify each of the following nouns. The implication of “a service” is that there are various services and that the express preemption applies to all of them. The reading urged by US Airways, in which the sentence applies to food and beverage service, is supported by the other four appellate decisions.
All five Circuit Court opinions apply recognized principles of statutory construction and dissect the text with well-sharpened scalpels. There is, however, a cleaver at hand.
Cutting Through Complexity –or Not
What makes US Airways worthy of discussion here is its use of the 21st Amendment to resolve a Supremacy Clause issue.
Rather than come to a conclusion as to which of the other circuits had reasoned correctly, Judge Armijo declared that the choice is forced, because interpreting the Act to apply to alcoholic beverage service would render it unconstitutional as a limitation on states’ rights preserved by § 2 of the 21st Amendment. Section 2 is, of course, the constitutional provision declaring unlawful the importation of intoxicating liquor into a state contrary to the state’s laws. Granholm adds the proviso that the state law claimed to trump a federal interest be “valid,” opening the floor to debate over how one tests for validity.
At the heart of the validity issue is the question whether parts of the constitution other than the 21st Amendment operate on state liquor laws in the same way as on state laws regulating ordinary goods. If they do, then the § 2 states’ right to venture into interstate commerce far enough to control wine importation at their borders applies only to laws that first pass muster under, e.g., the dormant Commerce Clause prohibition of discrimination against interstate commerce (as Granholm says) and under the Supremacy Clause (which US Airways ultimately excludes in the case at hand).
In finding state regulation valid, US Airways presents a somewhat convoluted syllogism, in which Congress did not intend to regulate liquor service because it could not constitutionally do so, but the federal statute might preempt the subject of liquor service anyway, if (a) the court found the federal interest in regulating liquor service outweighed the state’s interest in regulating the same subject and (b) the state laws had a significant impact on Congress’s objectives.
Imbalance
Judge Armijo implied that her decision was based in part on inadequate presentation of the airline’s case.
On how Supremacy Clause interests weigh in the balance, she wrote that US Airways “makes no argument and presents no evidence” that the state laws violate specific parts of the federal constitution, thus taking application of Granholm beyond the dormant Commerce Clause off the table. On the element of impact, she noted that the airline had not shown the state regulation “would have an adverse effect on competition and airfare.” She characterized the plaintiff’s contentions on effect as “speculative” and as taking too little account of unspecified “judicial and administrative relief under New Mexico law.”
Summing Up
After thus disposing of express preemption, the court might have had little to say about implied preemption; if the 21st Amendment would invalidate express preemption in a given subject area, it should also preclude inferring preemption in that area from Congressional occupancy of the field. However, in ruling against implied preemption, the opinion goes on to articulate two points that may prove controversial.
First, the court appears to view field preemption as requiring Congressional intent specifically to occupy a field consisting of the very subject addressed by the regulation in question, rather than to occupy a field broad enough to encompass that subject. Ascertaining implied intent is inevitably a process of divination with considerable discretion in the trial court, but the standard in US Airways may be unduly restrictive.
More significant is the second point, with which the opinion closes. The court declares that even if the subject requires “an extensive and uniform system of federal regulation,” a state may nevertheless assert a 21st Amendment right to exercise “virtually complete control” over how to structure distribution of liquor, entitling it to apply its panoply of retail licensee regulation to the federal carrier. It would be difficult to fashion a clearer expression of pre-Granholm law. The question is whether, in contexts that are not exact duplicates of the facts of Granholm, it is also a statement of current law.
Those who have followed this subject will recognize the “virtually complete control” phrase as part of a dictum from Midcal, quoted by Scalia in North Dakota v. U.S., where it was also dictum, and quoted again in Granholm, where it was dictum yet again and, as a dissenter correctly saw, incompatible with the holding. Ironically, the US Airways court cites Granholm for the control point. (For an explanation of the difference between holdings and dicta, see the blog post, Discrimination Against Out-of-State Retailers After Granholm.) Some dicta prove more substantial than the decisions that transmit them; whether that will be true of this one is the central question of current 21st Amendment litigation.
by R. Corbin Houchins, CorbinCounsel.com
Has the Price Posting Bunny Run Down?
July 21st, 2009
For the fourth time in the same case, TFWS, Inc. v. Franchot, a federal Court of Appeals has told the state of Maryland and its wholesaler-package store cohort that their price posting system conflicts with the Sherman Act, the nation’s premier antitrust law. As a federal enactment, the Sherman Act preempts inconsistent state law, pursuant to the Supremacy Clause of the federal constitution, absent a specific exception.
Maryland had indefatigably marched on, beating the drum for a 21st Amendment exception to federal antitrust law since 1999, when the suit began as TFWS, Inc. v. Schaefer. The latest rebuff, on 15 July 2009, repeats the teaching of the previous three appeals: “Not proved.” That ruling does not change the status of price posting in Maryland, because an earlier district court ruling to the same effect was not stayed on appeal. Presumably, the qualified abandonment of posting announced by the state in a 2007 bulletin continues in force.
TFWS is, however, more than a simple failure of proof. Deeper issues remain unresolved, at least one of which might, in theory, support an attempt by the unsuccessful appellants to obtain Supreme Court review.
To understand what is at stake, one has to consider three aspects of antitrust challenges to state restraints of trade in general and to the particular alcoholic beverage regulatory restraint known as “post and hold.”
First, it is basic antitrust law that a group of manufacturers or wholesalers who agreed among themselves to publish their price lists, to sell at no other prices, and to keep the list unchanged for 30 days would be violating the federal Sherman Act if they had any effect on interstate commerce. (Almost all wine business meets the interstate commerce requirement, and most states have “little Sherman Acts” without that requirement, so we can ignore the commerce issue.)
Second, it has been accepted antitrust law since the 1940s that states, acting in their sovereign capacities, are immune from federal antitrust law, on the rationale that our federal system could not operate if the central government could enjoin state exercise of governmental functions.
Thus, federal antitrust law allows a state to mandate conduct that, if done by individuals without involvement of the state, would land them in the federal pen. Maryland could, if it wanted, specify the prices at which wine is to be sold and require those prices to be posted and held in force for any period. That is “sovereign immunity,” and its failure as a defense in TFWS is an important aspect of the ruling to which we will return in a moment.
Third, if sovereign immunity is unavailable, the TFWS court recognized an independent potential defense, viz., that § 2 of the 21st Amendment (forbidding importation of wine contrary to the laws of the state) would have allowed the state to admit wine on the condition that it be sold in a manner contrary to federal antitrust law, if the state had proven certain preconditions. Its recognition of a 21st Amendment defense is, technically, dicta –i.e., commentary that is not required to support the decision, and therefore not binding as precedent on other courts. In other words, the outcome would have been the same if there were no 21st Amendment defense: the state lost.
So if price posting was state law, why did Maryland not have a good sovereign immunity defense?
Price posting laws are not pure state action because the parties setting the posted prices are private actors, not the state. If wholesalers set the price, and the state merely enforces adherence to it, the TFWS court, like courts that have looked at other price posting laws, classifies it not as state action, but rather as a “hybrid” of state and private action. Hybrid restraints of trade are subject to special rules in Sherman Act cases, as established by the Midcal decision in 1980.
The 4th Circuit applied the familiar two-prong Midcal test to Maryland’s system. One prong asks whether the substitution of regulating pricing in place of competition is an articulated state policy. The other asks if the state adequately supervises the prices posted to assure that the system does not deteriorate into simple private price-fixing. If the answer is no to either, it’s not state action, and no immunity applies. Like most cases applying Midcal to posting systems, TFWS found inadequate supervision and didn’t have to consider the policy articulation prong.
I have great fondness for the Sherman Act and cheer when it sweeps away restraints on trade in wine. Still, I have to admit uneasiness about the lack of post-Midcal explication by the Supreme Court on the boundaries of hybrid status. In the Midcal case itself, the state law required the private actors to engage in conduct that was necessarily an independent violation of the Sherman Act (resale price-fixing, at the time considered always illegal). It is not obvious that a posting system that requires each private actor only to select a price and post it is requiring an always-illegal act. On the other hand, that factor may not be necessary, as Midcal’s reasoning does not expressly limit the decision to systems that inevitably produce an independent Sherman Act violation on the part of the private actors.
Other courts, notably in the Miller case from Oregon, have bridged the gap by noting the opportunity for collusion, citing anticompetitive effects on the market, or (perhaps metaphysically) joining unilateral private acts with the known coercive power of the state to form the equivalent of a conspiracy. The recent Costco case in Washington State followed TFWS in picking up that approach, which seems reasonably well established, but thus far hasn’t been given a Supreme Court imprimatur.
A risk in an appeal in TFWS would be frontal attack on the Miller-Costco line of cases, with the objective of narrowing the prevailing understanding of Midcal and reviving the validity of posting laws like Maryland’s under the sovereign immunity doctrine. There is language in one post-Midcal decision supportive of that line of argument. Litigating the point would invite the long shot countermeasure of questioning the breadth of sovereign immunity itself, whose logical underpinnings in the Supreme Court’s 1943 Parker decision are of imperfect clarity, but which is deeply settled law, if for no other reason than age. It would be an intellectually stimulating debate, but one I’d readily forego for the sake of leaving the antitrust approach of Miller, Costco and TFWS undisturbed.
Entirely separate is the question of a 21st Amendment antitrust defense. As conceived by parties defending price posting, the defense would allow a state that failed to achieve sovereign immunity because of lack of active supervision nevertheless to maintain a hybrid system that turns private parties loose to violate antitrust law if the purpose is a recognized objective of liquor regulation, such as promotion of temperance.
One of the Midcal Court’s famous statements is that it was not deciding when “if ever” the states’ rights policy behind the 21st Amendment could outweigh the federal policy for competition expressed in the Sherman Act, which the Court has termed the Magna Carta of our economic liberties. It could duck that question because the state’s factual support for the law on those grounds had already been found wanting in a related case.
Thus, Midcal marks the beginning of a judicial snipe hunt for a defense that may not exist. To say that no 21st Amendment interest could be sufficient to justify direct contravention of fundamental competition policy embodied in the Sherman Act would be a profoundly controversial development in Supremacy Clause jurisprudence. It’s much less daring to rule repeatedly that the defense requires proof that is missing in the case at bar.
One of the unfortunate consequences of the Fourth Circuit’s recurring tutelage of the Maryland district court on the standard of proof is that prolonged disinclination to address the more fundamental question tends to lodge the idea that there must be a defense more firmly in the judicial mind. Formulation of the evidentiary requirements in TFWS has produced a kind of standard incantation for use by judges before invalidating a pricing law on Sherman Act grounds –wholeheartedly adopted, for example, in Costco.
As expressed in TFWS dicta, a 21st Amendment defense can be established if the evidence shows:
1) The state’s purpose is one of those protected by the Amendment.
2) The challenged law is effective in carrying out that purpose.
3) The state’s interest in the law, to the extent it is effective in carrying out the purpose, outweighs the federal interest in promoting competition.
Maryland maintained that the purpose of price posting was to make liquor more expensive, thereby promoting the objective of temperance. The court agreed that temperance is a legitimate 21st Amendment objective, and checked off item 1.
Most of TFWS was about item 2, effectiveness, and concerned how to measure relative prices between Maryland and neighboring states that did not use posting. Ten years of litigation failed to produce a sustainable finding that post and hold had a significant effect on temperance. Thus, the TFWS court did not have to reach the unwieldy issue of whether a temperance issue outweighed the policy of the Sherman Act (an area into which one may assume it had no wish to venture). The implication is that if the law had been effective, the district court would have had to receive and weigh some kind of evidence of the social importance of reduced liquor sales versus the public’s Sherman Act right to competitively determined pricing, a nightmarish prospect for all but the most fearless lower court judges.
One should not ignore opportunities to compliment one’s adversaries. In that spirit, I express continuing admiration of defenders of price posting for their ability to maintain a straight face while asserting that its purpose is temperance. Post and hold requirements are simply another method of reducing competition and thereby padding private profits, primarily in the middle tier. If a state wished to reduce problematic alcohol consumption by raising prices, it would increase its excise tax on frequently abused products, not throw a prize to industry members by attempting to grant them a spurious exemption from antitrust law. None of the states whose price posting laws have been invalidated has attempted to replace the stricken law with a system providing sufficient state supervision to meet the Midcal test or to return to court with proof of effectiveness under the TFWS test, and none has reported a resulting surge of intemperance.
If the “21st Amendment defense” to Sherman Act challenge remains in the realm of dicta, with its underlying factual requirements never proven, it may devolve to the status of mythical animal, doing no harm to protection of competition. Even so, however, the chimera would muddy analysis of our most important antitrust law and invite protracted judicial charades like TFWS. It would be a service if some judge somewhere would switch the bunny off for good.
by R. Corbin Houchins, CorbinCounsel.com
Still Looking for Granholm’s Limits
July 3rd, 2009
Anyone hoping the intermediate appellate court reversed in Granholm had become pro-commerce would have been disappointed by the July 1st decision of the Second Circuit in Arnold’s Wines, Inc. v. Boyle.
At issue was whether a state permitting its local retail licensees to ship directly to consumers might constitutionally deny out-of-state retail licensees equivalent access. The Court of Appeals reached the less than crystalline conclusion that discrimination against interstate sellers is permissible under the 21st Amendment “insofar as it requires that all liquor sold within the State of New York pass through New York’s three-tier regulatory system.”
Judge Wesley, writing for an essentially undivided three-member panel, asserts that the locals-only licensing system “allows the state to oversee” (1) financial relationships among manufacturers, wholesalers, and retailers,” which relate to state tied-house statutes limiting vertical integration, and (2) the prices and other terms of sale, which the state purports to regulate with the objective of averting overconsumption and disorderly marketing. He also notes that New York claims the system allows the state to collect taxes more efficiently than with alternative systems and to prevent sales to minors.
One cannot accurately maintain that the challenged licensing system “allows” those regulatory objectives in the sense of being necessary to achieve them. It is even less defensible to assert that location discrimination in applying a licensing system is necessary to oversee financial relationships and sales terms, to collect taxes with acceptable efficiency, or to prevent underage purchases. Thus, the court cannot escape the question whether less discriminatory means exist –unless it takes the discrimination entirely out of Granholm’s analysis of discriminatory laws. Most of the opinion is an attempt to do just that.
To circumvent the nondiscriminatory means issue, Judge Wesley articulates the “narrow Granholm” 21st Amendment-Commerce Clause theory: “It is only where states create discriminatory exceptions to the three-tier system, allowing in-state, but not out-of-state, liquor to bypass the three regulatory tiers, that their laws are subject to invalidation based on the Commerce Clause.” His opinion recognizes (or carves) an exception to the equal access principle, based on the famous North Dakota statement that the 21st Amendment “empowers [a state] to require that all liquor sold for use in the State be purchased from a licensed in-state wholesaler (emphasis supplied),” even though that text appears in Granholm only as a “see also” citation that is not part of the Granholm holding and is also dictum in North Dakota itself. He does not overtly consider whether Granholm’s undoubted assertion of the legitimacy of three-tier systems includes the qualification (arguably inherent in the Granholm holding) that such systems may not employ location discrimination unless it is necessity-justified by some purpose other than perpetuation of the system itself. Without inclusion of that qualifier, it is easy to stop analyzing the Granholm opinion for effects on tiered distribution when one reaches its quotation from North Dakota.
Thus, Arnold’s Wines puts us squarely into the fundamental uncertainty about Granholm: Are only what the majority calls “valid” or “generally applicable” (i.e., location-nondiscriminatory) restrictions permissible, even in areas of traditional state’s rights under the 21st Amendment, as Justice Thomas says disapprovingly in his dissent, or is there something special about passage of title through a wholesaler that provides ipso facto legitimacy to location discrimination between in-state and out-of-state resellers of the product?
Clearly in the second camp, the Arnold’s Wines majority opinion advances two propositions as rationales for its decision:
1. The “three-tier system” means goods physically moving through all three tiers, the lower two of which are located in the same state as the consumer who purchases the goods. A ruling requiring equal access to the same consumers by out-of-state retailers is therefore an attack on the three-tier system, which would not be consistent with Granholm, because the majority in that case said the three-tier system is unquestionably legitimate.
2. New York’s law “treats in-state and out-of-state liquor evenhandedly” once it is in the state’s three-tier system, and “thus complies with Granholm‘s nondiscrimination principle.” Equal treatment of products by allowing them all, regardless of original site of manufacture, to pass through the three-tier system, satisfies Commerce Clause requirements, even if the law prohibits interstate sellers to reach the same consumers as local sellers. The dormant Commerce Clause protects goods, not merchants.
In a concurring opinion, Judge Calabresi agrees with his colleagues’ reasoning, but adds an eloquent originalist plea for judicial caution in “updating” constitutional provisions that (unlike, e.g., due process of law) are not drafted loosely with an implied invitation to reinterpret them as society changes. One has the impression he wishes he could have restrained the impetuosity of the Granholm majority. He was, in any event, determined not to extend that opinion’s 2005 update of the 21st Amendment beyond his panel’s delimited reading.
Relatively short in comparison to the complexity of the issues, the majority opinion does not address a number of questions raised by its stated rationales.
In the first place, it is not at all clear that Judge Wesley’s three-tier system is the same thing as the three-tier system declared legitimate in Granholm. The Granholm majority unmistakably implies there are such things as constitutional systems funneling all wine sales through local wholesalers, but is silent (to the exasperation of Justice Thomas) on how they would operate without producing impermissible favoritism toward local versus interstate commerce. One court has already attempted to resolve the conundrum by preserving a state requirement that sales go through a locally licensed wholesaler, but requiring the state to process retail license applications without location discrimination. If one adds drop shipment to that scenario, it becomes possible to run all sales through an in-state distributor (who would presumably also be responsible for tax and price reporting) and avoid location discrimination in access to local consumers.
Ultimately, the first rationale rests on the court’s pronouncement that unequal access to customers by retailers is “part of the three-tier licensing structure” (vice distribution system) established in New York. When the court concludes that exemption of unequal access from Commerce Clause scrutiny is established by that proposition, it is committing what a logician would call a mereological fallacy. That is, assuming the state’s licensing structure could be part of a three-tier system, it does not follow that special exempted status accorded three-tier systems applies to each part of it. That logical gap would exist even if the North Dakota dictum were established law, and even if one further assumed that all members of the class “three-tier systems” were exempt from the dormant Commerce Clause.
With respect to the second rationale, the Court of Appeals may have made a bold departure from the conceptual underpinnings of Commerce Clause jurisprudence in its attempt to diminish Granholm’s scope. Most judges and commentators have assumed that the Commerce Clause is intended to protect commerce, not merely choice of manufacturing site. It is, of course, entirely proper for a court to attempt to limit a disliked precedent to its specific facts, but drawing the line at products, excluding protection of downstream merchants, seems extreme.
Judge Wesley may have been forced to an extreme position to support his assertion that the facts before him were in “stark contrast” to those of Granholm. Viewed from another angle, the distance between the cases does not appear so great. Mrs. Swedenburg’s wines and those of the other Granholm plaintiffs had equal rights with New York wines to direct delivery to New York consumers from bricks-and-mortar locations within New York. That may not be so easy to distinguish from the Arnold’s Wines plaintiffs’ equal right to sell to New York consumers through bricks-and-mortar wholesalers and retailers within New York. One need not read Granholm very broadly to conclude that if the former was invalid, the validity of the latter is at least questionable.
Because the court seems to believe no nondiscriminatory means inquiry is necessary, its reference to state purposes may be only a makeweight. However, it is worth noting that the listed objectives themselves are not all necessarily legitimate. If the purpose of tied-house laws is to prevent supplier interests in New York retailers, regulation of sales by those retailers within New York is sufficient. Only if New York’s objective is to prevent such interests in retailers located in other states is it necessary to “oversee” the financial relationships of those sellers. That objective, however, raises significant issues of extraterritoriality. In a 1989 beer pricing case, the Supreme Court enunciated limits on state legislation, 21st Amendment notwithstanding, short of regulating conduct that occurs entirely outside the state (which would appear to include financial relationships among entities in another state, whether or not one of them sells into the state) or causing a patchwork of different requirements for businesses engaged in interstate commerce (as seems the case, given the widely differing requirements of state tied-house laws). Those limitations suggest that tied-house oversight of out-of-state sellers is a not legitimate purpose that can be advanced to justify discrimination. Worse, extraterritorial effect of state laws is ordinarily considered not merely discrimination against, but direct state regulation of, interstate commerce –an unconstitutional invasion of the federal sphere that cannot be rendered legal by laudable purpose.
In sum, Arnold’s Wines is a forceful formulation of the narrow Granholm position, with a forthright end run around less-discriminatory-means analysis. Its clarity emphasizes the developing differences among federal circuits in understanding that landmark case. While it is doubtful the Supreme Court has much appetite for revisiting Granholm, divergent interpretations at the intermediate level slowly increase the probability of high court review.
by R. Corbin Houchins, CorbinCounsel.com
Maine Event, At Last
June 13th, 2009
After years of trying, wine commerce proponents succeeded in adding Maine to the list of license states for direct shipment. Governor Baldacci signed HP 696/LD 1008 on June 12th.
After the Bureau of Liquor Enforcement adopts regulations and licensing procedures, the law will permit out-of-state and Maine farm wineries alike to ship wine (but not wine coolers!) directly to consumers by common carrier, subject to the same taxes as if sold locally. Meanwhile, the on-site provisions summarized in previous releases of Notes on Wine Distribution appear to remain available.
by R. Corbin Houchins, CorbinCounsel.com
Labeling Sotomayor
June 2nd, 2009
Although I don’t believe anyone has found a beverage law opinion by Judge Sonia Sotomayor, there’s a good deal of blog traffic related to the fact she did not dissent from Circuit Judge Wesley’s opinion in Swedenburg v. Kelly, a Second Circuit decision famously reversed by the Supreme Court in Granholm v. Heald. As Justice Souter was in the Granholm majority, some wholesalers have already publicly rejoiced that his putative replacement may help swing the balance toward limiting Granholm’s reach.
To understand the significance of Judge Sotomayor’s participation in Swedenburg, it is helpful to examine the context. First, Swedenburg was decided in February 2004, following the law of the circuit as it then existed. The Second Circuit is the source of Battipaglia and other conservative 21st Amendment rulings; precedent strongly supported Judge Wesley’s conclusions. It should be no surprise to an industry that rightly hails Granholm as an innovative stroke profoundly readjusting the balance between the commerce clause and the 21st Amendment that a lower court decision two years earlier did not reach the same result. Second, the Swedenburg decision was pro-commerce in its consideration of the First Amendment issue raised by the New York statutory scheme, striking down a provision that prohibited importation of information about availability of wine at out-of-state wineries, even for lawful purchase. The other two judges on the three-judge Swedenburg panel might have gone along with the result without necessarily holding “strong 21st Amendment” positions or endorsing every aspect of Judge Wesley’s analysis.
As Tom Wark said in his blog, it will be interesting to see if confirmation hearings put direct shipment in the legal news again. It will be even more interesting to see how Justice Sotomayor comes down on implications of Granholm for the second wave of commerce cases.
